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Like the rest of America, Orange County is in the midst of a health care revolution – one that is reshaping the traditional employer-provided health insurance coverage model. In a somewhat ironic twist, this transformation is also shining a brighter-than-ever spotlight on a concept born in the city of Orange nearly 20 years ago: the private health insurance exchange.

While the Affordable Care Act has put a spotlight on government-run exchanges (often for the wrong reasons), private versions have been in operation for almost two decades in numerous states. In fact, the United States’ first private exchange, CaliforniaChoice, was established in Orange in 1996. Thanks to health care reform momentum, private exchanges like this are poised to transform health care for the region’s estimated 1.3 million workers, including thousands employed by the more than 15,000 businesses located within Orange alone.

So what is a private exchange? It is a marketplace of health insurance and related benefits that offers access to multiple health plans in a single, unified program. Working directly with insurance brokers, companies purchase insurance through the exchange. Employees then choose from as many as six to seven health plans from reputable carriers such as Aetna, Kaiser Permanente, Anthem Blue Cross or others.

Through a private exchange, local employers can allocate a set amount of dollars toward the program through what’s called “defined contribution.” Generally speaking, this approach enables an employer to fix the amount of their financial contribution obligation while enabling an employee to use this fixed contribution to select from a variety of benefit options. This provides cost controls while supporting an employee’s health care.

For the many Orange County workers employed by small businesses with one to 50 people, these exchanges offer an especially powerful, viable and valuable option. Whether you are a small business owner in Orange or Irvine, private exchanges help drive down health care costs and reduce administrative burdens in an increasingly complex regulatory environment. And they do so while expanding the benefit choices for your employees.

On the flip side, a private exchange offers workers choice and flexibility. They select and purchase their insurance policy from available options. If they want to upgrade their plan or add other benefits like life insurance beyond the employer contribution, they have the option to pay to do so.

Perhaps best of all, well-run private exchanges are very effective because they are held to the highest free market standards. They must deliver value – the best service, choices and prices – to stay competitive.

While media attention around federal- and state-operated exchanges will likely persist in the near term, established private exchanges will continue to quietly build steam. In fact, private exchange participation nationally is projected to exceed public exchange enrollment levels by 2018, according to a 2013 report by Accenture.

Given this trend, Orange County employers may be wise to take advantage of private exchange programs as they seek solutions to cost-effectively address the changing landscape of traditional employee benefits programs.

For more information about private health insurance exchanges, visit calchoice.com.

– Ron Goldstein created and currently manages CaliforniaChoice. He also serves as president and chief executive of Orange-based Choice Administrators.

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